Paschal Donohoe has landed a plum job as no. 2 at the World Bank in Washington DC. He is in line to receive a salary and expenses of over $600,000 per annum, tax-free. Much attention has focused on what this means for Irish politics, but what does it say about the World Bank? And what does the future hold for the Bank and other institutions of Western-led global economic governance?
The World Bank was founded, along with its sister organisation the International Monetary Fund (IMF), at the Bretton Woods conference of 1944 where the soon-to-be victorious Western allies constructed the economic governance architecture of the post-war world. The IMF developed into a backstop lender of last resort for member countries, to which they could turn (at a price) when other borrowing options were foreclosed to them. The World Bank became the world’s largest development (so-called) organisation, dispensing loans, grants and policy advice to the Global South (sometimes called Developing Countries or the ‘Third World’).
Both organisations have long been controversial but criticism intensified from the early 1980s onwards as a debt crisis engulfed much of the Global South and, in order to qualify for limited debt relief as well as access to new lending and aid, countries were obliged, under IMF and World Bank conditionality, to adopt so-called ‘structural adjustment’ policies, including:
- Abolition of consumer and producer subsidies, alongside general cutbacks in government expenditure;
- Reduction or removal of trade barriers, such as tariffs, that had protected domestic industries from foreign competition;
- Reduction or removal of capital controls and the adoption of an open-door approach to foreign investment;
- Privatisation of state enterprises.
Neoliberal austerity
The overall thrust was towards the rolling back of the welfare-promoting and regulatory (for the public good) roles of the state in the economy and an opening up to foreign competition and capital. Not surprisingly, the results usually involved austerity for many, rising inequality and deindustrialisation as the Global South was incorporated into an increasingly neoliberal and globalised world economy. The countries (China especially) that have experienced the most significant economic growth and poverty reduction over recent decades have not adopted neoliberal adjustment strictures, any more than did Western and other economically successful economies in earlier periods.
Notwithstanding their negative (for many) impacts, similar adjustment policies were imposed upon the countries of the former Soviet bloc at the end of the Cold War, on countries in East Asia (such as South Korea) in the wake of a late 1990s financial crisis there, and on peripheral European countries (such as Ireland and Greece) after the crash of 2008, though without the specific involvement of the World Bank in that last case as its mandate limits its activities to the Global South.
While hostile to many aspects of state intervention, the World Bank nonetheless still sees the state as a crucial actor, specifically as a wielder of tools to open up spaces for private capital accumulation. The state, at national or supranational level, does this most obviously through pushing the privatisation of health, education, housing and other services, but also through the establishment of a legal framework in areas like contract enforcement and the protection of private companies’ patents (this last a particular service to price-gouging pharmaceutical companies). The neoliberal state is also charged with maintaining ‘competitiveness’ (reducing the share of income retained by workers) by, for example, strictly delimiting collective bargaining rights and employment protections (the World Bank’s headline Business-Ready index tends to rank highest those countries with the weakest labour rights), while ensuring welfare provision is sufficiently limited to maintain appropriate ‘incentives’ to work. The prioritisation of macroeconomic ‘stability’ – according greater emphasis to low inflation and limited government deficit spending than to employment – is also seen as an appropriate state remit. And, of course, when all else fails, the state has to be there to deploy coercion against resistance to neoliberal rule.
Capital accumulation
The arm of the World Bank most associated with clearing the way for private capital accumulation is the International Finance Corporation (IFC). Its activities have long been heavily criticised: for example, for-profit educational providers supported by the IFC in Africa have been found to employ unqualified teachers on low salaries, and private hospitals it has sponsored have been found to be characterised by poor oversight and standards. It is also an egregious contributor to global warming: in 2022, some $3.7 billion in IFC trade financing went to the oil and gas industries. In fairness, this makes the IFC something of an outlier as other wings of the Bank have taken the climate change agenda on board to some extent.
But the IFC is not an outlier within the overall World Bank group when it comes to the central thrust of economic policy: the ‘knowledge teams’ of the Bank’s other lending and grant-giving arms are, in fact, being merged with that of the IFC to promote an overarching “business-friendly environment” (as they themselves put it) and to further facilitate the IFC mobilisation of private capital. Donohoe, as Managing Director and Chief Knowledge Officer, is likely to be centrally involved in this merger, the Bank President referencing Paschal’s knowledge of “how good policies can unleash private capital accumulation” in the press release welcoming his appointment.
In Ireland we already know all about Donohoe’s friendly approach to private capital at the expense of the public good. He warmly welcomed foreign investment (‘vulture’) funds into the Irish property market, thus favouring speculative profit-seeking over public building of affordable homes. Donohoe has said that “At the heart of these investment funds is the role that they can play in our country, in allowing us to organise savings that are held elsewhere in the world to deliver more housing supply” – or, as he might have said, to deliver outrageous profits to the funds concerned. Substitute ‘the Global South’ for ‘our country’, and ‘development’ for ‘more housing supply’ in that quote, and you likely have the philosophy Donohoe will be bringing to his World Bank role.
Severe debt
He will have a kindred spirit in his new boss. The President of the World Bank is Ajay Banga (a Biden appointee), whose background is in private finance, including a term as chief executive of MasterCard where he oversaw the firm’s partnership with a company called Net1 (in which the World Bank’s IFC became the major shareholder) to distribute welfare payments to the poor in South Africa through MasterCard’s debit cards. Net1 collected recipients’ data on income and spending and specifically targeted them with tempting offers of financial products, such as funeral insurance and cell phone credit, repayment being automatically deducted at source from welfare disbursements. Many people ended up destitute and in severe debt (often turning to other money lenders), debt which they had no opportunity to relieve or reschedule because the money was being directly lifted from their MasterCard accounts. It was a classic example of the functions of the state (in this case the disbursal of essential grants) being leveraged for private capital accumulation.
The pressing problem of poor people’s indebtedness is not confined to one scheme in South Africa. Between 2022 and 2024, foreign private creditors extracted $141 billion in debt service payments from the public sectors of the Global South. Total debt servicing on the part of the Global South now absorbs 45% of government revenues (70% in the case of the very poorest countries) – 3 times the level of spending on education, and 4 times spending on health. Total Global South public debt stood at $31 trillion in 2024.
Yet the policies pushed by the World Bank, especially its IFC arm, are likely to worsen this deep and growing indebtedness crisis. As the Bretton Woods Project (a critical NGO) observes regarding the World Bank and IMF management meetings in October 2025, “austerity and private capital mobilization remain the prescribed medicines to compounding crises and unsustainable debt levels”. At an event entitled ‘Mobilising private investment to create jobs’, a proposal was put forward whereby $510 million in IFC loans would be treated as a bundled asset, with sliced-up portions then sold on to private investors in a manner reminiscent of the collateralised debt obligations (CDOs, largely based on mortgage loans) that helped bring about the 2008 financial crash. US Treasury Secretary Scott Bessant (the US is the major shareholder of both the Bank and the IMF and holds veto rights in both institutions) backs the emphasis on policies “that enable the private sector to flourish” and rails against “overregulation” (he also expresses Trumpian disdain for climate- and gender-focused actions).
Geopolitical turmoil
The Bank’s broad alignment with US policy may not save it from the incoherent wrath of the Trump regime. Donohoe takes up his new job at a time of significant geopolitical turmoil and unpredictability. The right-wing Heritage Foundation drew up a pre-election blueprint for a Trump presidency and its recommendations included the US leaving the IMF and the World Bank altogether. This is in line with a general hard-right preference for unilateral US action and a distaste for multilateral institutions (NATO, for example, is also distrusted within these circles as a constraint and drain on US power, while international cooperation on combating climate change is treated with contempt). A review of US membership of the Bretton Woods organisations is ongoing.
For defenders of the Bretton Woods bodies, Trump’s threats to the World Bank and IMF smack of self-harm. They point out that “The US has consistently maintained tight control over these institutions… [S]tudies have repeatedly shown that the IMF and World Bank’s lending patterns closely align with US national interests”. The willingness of the Bank to pump money into post-invasion Iraq and Afghanistan is cited (with good reason) as proof of its usefulness to the US imperial project. Backing up this position, but from a critical perspective, Filipino anti-imperialist Walden Bello documents the World Bank’s long-term support for the Marcos (a US client) dictatorship in his home country. Michela Wrong has similarly shown how the World Bank helped keep the pro-Western tyrant Mobutu in power in Zaire (as it then was) for decades. There are many other examples.
How these tensions within US ruling class fractions will pan out remains to be seen. That the World Bank could still retain, in part at least, its status as a bulwark of US imperialism is attested by its putative role in underwriting the trust fund earmarked to finance Trump’s plan for the occupation of Gaza. (A plan that is unlikely to be challenged by Donohoe given his record here at home of seeking to subvert and block the Occupied Territories Bill).
But the challenges to the Bank come not only from within the US. China and other so-called BRICs nations may not pose any fundamental anti-capitalist challenge to the Bretton Woods bodies but they do want a bigger say in their governance. And China in particular is prepared to offer alternatives to them. An example is the establishment by China in 2016 of the Asian Infrastructure Investment Bank (AIIB) as a source of development finance. One study concludes that the AIIB “could unsettle the political influence the United States has enjoyed over developing countries through its leadership of the World Bank. An important set of countries may be parting ways with the World Bank and looking to a Chinese institution for leadership in the world of development”.
Donohoe takes over his new job at a time of severe global turbulence: US imperialism is facing fundamental challenges (not just from China but also from popular revulsion at the genocide in Gaza in particular), and its ruling class is divided against itself; militarisation and the threat of war is accelerating apace; new financial storms are brewing (with bursting of the AI or cryptocurrency bubbles amongst the possible catalysts for a crash); and all this is occurring in a context of severe global indebtedness (public and private) and an intensifying climate emergency. Come what may, Donohoe will be personally well rewarded, but his record may yet be inextricably linked with a period of deep, far-reaching, multiple crises of global capitalism.
